GM Shares Could Sweeten Chrysler Group Deal

News, 27 February 2007

DETROIT: Talks between General Motors and DaimlerChrysler over the future of the latter's US unit, Chrysler Group, are continuing apace. Latest reports suggest the German giant could snap up a minority stake in GM in return for the struggling enterprise.

Daimler-Chrysler, which appointed investment bankers JPMorgan to advise on its subsidiary's prospects [WARC News: 16-Feb-07], is also mulling a sale to private equity groups, a floatation or, indeed, a turnaround plan.

GM, which itself is financially challenged, may be willing to swap shares for Chrysler assets rather than having to find hard cash, while DaimlerChrysler's rewards from the merger could include billions of dollars of cost savings and technology sharing.

Its US unit, which posted an operating loss of $1.4 billion (€1.06bn; £713m) in 2006, has already announced plans to shed 13,000 jobs, including 11,000 production workers and 2,000 white-collar staff as it trims expenses to match declining sales. It also announced the closure of one plant and layoffs at several others.

GM and DaimlerChrysler remain zip-lipped about the latest twists and turns on this intriguing route, but insiders say a due diligence process is under way.

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